Groupon Inc (GRPN) Options Pop On Buyout Buzz

GRPN options are heating up amid speculation of a BABA bid

by Andrea Kramer

Published on Feb 19, 2016 at 1:55 PM

The shares of mega coupon concern Groupon Inc (NASDAQ:GRPN) are skyrocketing this afternoon, once again thanks to Alibaba Group Holding Ltd (NYSE:BABA). Just days after BABA reported a stake in GRPN, reports are circulating that BABA could be on the cusp of takeover talks with GRPN. As such, GRPN options are flying off the shelves at a rapid-fire rate, especially on the bullish side of the aisle.

GRPN calls are crossing the tape at six times the average intraday clip, and have outpaced puts by nearly 10-to-1 so far. Along with some apparent eleventh-hour betting at the February 4.50 call, which expires at today's close, some bulls may be snapping up the March 5 call.

By buying the calls to open, the speculators expect GRPN to surmount $5 by the close on Friday, March 18, when the options expire. Delta on the call more than doubled, to 0.30 from 0.16 yesterday, implying a roughly 30% chance of the option finishing in the money. GRPN hasn't traded north of $5 since July.

At last check, the equity is up 10.9% at $4.26, and peaked at $4.45 earlier today. Groupon Inc (NASDAQ:GRPN) is on pace to end the month atop its 10-month moving average for the first time in a year, up nearly 57% so far in February. As such, short sellers could be sweating. Short interest represents nearly two weeks' worth of pent-up buying demand, at GRPN's average pace of trading.

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